Chile peso at 15-mth high as carry trades unwound

Tue Nov 10, 2009 5:28pm GMT
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(Updates with comparative data, quote)

SANTIAGO, Nov 10 (Reuters) - Chile's peso CLP=CL closed 0.99 percent firmer on Tuesday at a 15-month high, boosted by more dollars flowing into the market as investors unwound carry trades, traders said.

The peso ended at 507.20/507.50 per dollar, the highest close since August 2008 and compared to Monday's close of 512.20/512.70.

The peso has gained sharply since Brazil in October introduced a 2 percent tax on investment inflows, which has prompted unwinding of some carry trades involving the Chilean peso.

The peso has been used to make bets against such higher-interest currencies such as the Brazilian real BRL=, traders say.

"We are seeing a pronounced trend, and it all started with the 2 percent tax in Brazil," said Rodrigo Sarria, a trader with Celfin Capital, adding he would not be surprised to see the peso firm to 500 per dollar in the short term or ultimately strengthen even further.

The peso has surged 26.38 percent so far this year, after sliding 22.3 percent in 2008, and analysts see room for some further gains.

Carry trades involve investors borrowing in countries where financing costs are cheap, such as Chile, to invest in higher-yielding currencies. The unwinding of such positions has dominated trade in recent sessions, boosting the peso. (Reporting by Froilan Romero; Editing by Leslie Adler)

 
 
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